is buying Etf and index funds like buying stock, but more expensive, or is it a stock that represents a kind or a type and that is what makes it much more expensive? ETF stands for exchange traded fund. That term encompasses both some index funds and also closed end funds. They are traded like stocks, based on what people are willing to pay form them. Mutual funds include both closed end funds, index funds, and open end mutual funds. Open end mutual funds are sold directly by mutual fund companies at net asset value after the market closes.
ETF may trade at more than net asset value or less than net asset value. They can be bought and sold at any time during which the market is open for trading.
Actually many closed end funds are less expensive than open end funds because they trade at less than net asset value, some at a significant discount of 10% to 15%. Some perhaps even more. Some open end funds have a front end load (sales charge). Closed end funds have broker commissions to buy and sell but that is normally less than the sales charge of loaded funds.
They main thing to be concerned about is the expense ratio of the fund. This can very greatly from fund to fund. Index funds generally have much lower expense ratios than managed funds ranging from 0.09% to about 0.6%. The average expense ratio of a managed fund is about 1.5% but does vary greately from about 0.5% to about 3.0% or even more.
If you buy stocks directly, you avoid the expense ratio, but you do have to pay brokerage commissions on your purchases and sales.
Here is a link to most ETF, both closed end and index funds where you can research them.
http://www.etfconnect.com/ ETF is like a mutual fund in that it is a group of stocks. You buy and sell it over the market just like a stock. It has lower managment fees than a mutual fund.
Index fund is a mutual fund that has a grouping of stocks pertaining to a specific index, like S&P or DOW.
A stock is an indivdual company. Buying an individual stock is more risky since you're not as diversified.
Yes, buying ETFs and index funds is like buying stock. You're buying shares in that grouping of stocks. When you buy an ETF you pay the same fee (about $10) to buy the ETF as you would when you buy an individual stock. This is a one time fee.
When you buy a MFund, you're charge a "management" fee of usually around 1% per year. If you have $10,000 in the fund, this amounts to about $100 per year.
Best Regards.
/// An ETF is NOT a stock.
It is a derivative security which is issued by an orgainzation like Barclays, State Street Bank, Fidelity etc and represents the TOTAL performance (dividends/interest and market appreciation) of an underlying portfolio of stocks less the fees charged by the issuing organization. These fees are generally less than the fees charged by a mutual fund and frequently less than those charged by an index fund. An ETF is managed in a strictly PASSIVE manner, i.e. the issuing organization does not have any discretion over what the ETF holds, its is strictly defined.
For example, the ETF with the symbol OIH is the Oil Service Holders Trust and represents the total performance of 18 oil service companies (SLB, RIG, HAL, BHI, GSF, DO, NE, WFT, BJS, SII, NBR, ESV, NOV, CAM, GRP, TDW, RDC and HC)
The underlying portfolio of stocks may be all the stocks in a certain index. For example the SPY is the ETF that tracks the performance of the S&P 500 Index and the QQQQ is the ETF that tracks the performance of the NASDAQ 100 Stock Index.
An index fund is a fund that tracks the performance of a given index less fees, for example the Fidelity S&P 500 Index Fund tracks the S&P 500 Index. An index fund may utilize stocks, futures or options to achieve its objective. An ETF is only permitted to use the underlying securities that the ETF is designed to track.
A mutual fund is simply a security that delivers to the investor, the performance of a portfolio of underlying securities reduced by the mutual fund's fees. Those underlying securities may be or stocks, bonds, futures, options or any combination thereof as described in the prospectus of the fund. A mutual fund may be actively or passively managed. Fees for mutual funds are generally higher than index funds or ETFs.
A stock is a security which represents a proportionate ownership in the net assets of a corporation. The performance of the stock is based on the performance of the management of the company to produce returns from the investments or operations of the company. A company may be an operating company, an investment company or any combination thereof.
ETFs were created to make index/portfolio investing simple and similar to stocks. The fact that you can trade an ETF like you can trade a stock does not make the ETF a stock.
An ETF can be any price range. The issuing organization may split an ETF if it so desires. The fact that several ETFs are high priced is just a result of (i) the performance of the underlying stocks in the ETF, (ii) the original issue price of the ETF and (iii) whether the ETF has been split or not during its lifetime.
My best experience with online brokerage/investing/day trading/scalping was and continues to be with Remata Trading. They are professional and will not rip you off. Their commissions are low and they provide you with direct access to the market from your own home computer. They also provide real legitimate training, access to pre- and after-market news and research.
You can contact them at:
http://rematatrading.com/contactus.aspx....
For training call Steve at 201-236-2500 until harry p spouted off that ad (which has extremly limited info) he gave the best answer out of the group (for now). The stock rpice is just that the price of the stock Google is over $400 (and too much) while you could get the ETF of IPO's (which google is in) for somewhere around $14 a share. Supply and demand makes it cheap or expensive (or in Googles case insane) but sometimes market seniment dictates stock price as well (like Ford and Vonage) other times its investigations and bankruptices (new and delta comes in here) that has the final say. ETF and Mutual Funds thrive because they deal in more than one stock and sector limits the higher risk of just owning that one stock.
But to each his own. An ETF is a security that holds a basket of stocks, but this basket trades on the exchanges like a stock. This basket of stocks can be an index (e.g. SPY represents the S&P 500 index) or it can be stocks from an industry (e.g. OIH has stocks in the oil service industry). Thus, an ETF allows an investor to own a basket of stocks through one security.
The company that puts together an ETF charges an annual fee on the total outstanding balance of the ETF (usually 0.2%-1%). Therefore, there is an expense that exists that wouldnt exist if you bought the underlying stocks by themselves. On the other hand, most individuals don't have the resources to buy dozens or hundreds of individual stocks, and even if they did, the commissions would certainly add up. Therefore, the ETF companies are charging a fee for a reason.
A mutual fund is similar to an ETF as it also holds a basket of stocks. The major difference is that a mutual fund isn't traded on an exchange and therefore, you can only buy and sell them once a day. Similarly to an ETF, the mutual fund companies also charge a annual management fees as a percentage of assets.
Index funds are mutual funds that hold stocks representing an index (e.g. S&P 500 or Dow Jones Industrial Index).
For most investors, ETFs and mutual funds are an easy, cost-effective way to construct a diversified stock porfolio. However, I would be very careful to scruntinize the fees that are associated with the different product options. The annual fees associated with ETFs and mutual funds can eat into
returns over time, so try to look annual fees less than 1.5% per year. For mutual funds, be wary of "load fees" - these are fees that the brokerage firm charges to you to buy or sell a mutual fund - if possible, you should avoid these. |
